Real estate investment trusts and major house builder feature in leading FTSE 100 sustainability report with warning more needs to be done
• Companies ranking in the FTSE 100 top ten include Landsec, British Land and Barratt Developments
• 45% of FTSE are committed to Net Zero transition by 2050, but only 16% have a strategy to realistically meet the commitment
• Investor pressure is having a significant impact on corporate sustainability reporting
London, September 23, 2020 – EcoAct, the international climate and sustainability consultancy, has today released the 10th edition of its Sustainability Reporting Performance of the FTSE 100. The report, which includes a leader board ranking the top 20 companies for environmental sustainability disclosure reveals that although an increasing number of companies are setting a Net Zero target, there is an absence of a clearly defined strategy for many.
Real estate investment trusts have scored particularly well with both Landsec and British Land ranking at positions 3 and 6 respectively. They are only two of sixteen companies across the FTSE 100 that have demonstrated a detailed strategy to reach net zero and both are aiming to achieve it by 2030. Their rankings reflect efforts to set ambitious science-based targets (SBTs); align reporting with Task Force on Climate-related Financial Disclosures (TCFD); reduce energy consumption and incorporate sustainable finance into investment frameworks.
Also of note is Barratt Developments which ranks within the top 20 at 16th position having moved up an impressive 21 places in the ranking since last year. The company also announced this year that it is committed to achieving net zero by 2040 and has set an SBT.
According to the UK Green Building Council, the built environment accounts for approximately 40% of the UK’s carbon emissions. With net zero transition strategies needing to be in place by 2030 with a net zero target no later than 2050, focus and pressure will inevitably turn towards the real estate and construction sectors to facilitate an urgent low-carbon transition. This is likely to be a leading driver in the sustainability performance improvements seen in the industry this year.
“Over the ten years we have undertaken this research, we’ve continued to see year-on-year improvements to climate-related reported best practice”, said Stuart Lemmon, CEO, Northern Europe, EcoAct. “Although we are encouraged to see an uplift in company commitments to Net Zero this year, if we are to succeed in this goal, it is imperative that commitments are backed by sound and achievable strategy.”
Scores allocated to all FTSE 100 companies in the report range from 0% at their lowest to 92% at their best, demonstrating a highly disparate mix of sustainability performance and indicating that adequate climate-related reporting is still not a given in large companies. Looking at the real estate, construction and home building sectors, this is particularly relevant, with companies such as the Landsec, British Land, Barratt and the Berkeley Group having performed well while many others have performed poorly.
Overall key report findings:
Investors driving change
A key driver for best practice reporting is increased pressure from investors demanding better climate-related disclosures as set out by The Task Force on Climate-related Financial Disclosures (TCFD), led by former Governor of the Bank of England, Mark Carney. Alignment to TCFD has increased rapidly from only 15% of FTSE 100 companies in 2018 to 56% in 2020 as companies respond to investor demands for business climate risk assessments.
Science- based targets
Science-based targets (SBTs) are ambitious emission reduction targets aligned to a decarbonisation pathway to limit global warming to 1.5°C or well below 2°C as advised by climate scientists. The report shows that that companies are more likely to be on track to meet carbon reduction targets if they set SBTs, but only 35% of FTSE 100 companies are currently doing so.
Scope 3
Three quarters of FTSE 100 companies assessed in the research are calculating and disclosing their Scope 3 emissions – those indirect emissions occurring across a company’s value chain from sources not owned or controlled by the company. However, only 33% have a target to reduce them. Yet they play a crucial role in identifying the greatest sources of emissions involved in a company’s total operations and are key to a decarbonisation strategy. Success in meeting Net Zero is dependent on more companies demonstrating transparency and proactivity in Scope 3 reporting and exerting their influence to affect wider positive change.
Assessing risk
While the report reveals that 81% of UK companies are assessing risks to their operations from climate change, only 64% are assessing them across their value chain. And only 56% have plans in place to mitigate those risks.
Landsec case study
Real estate investment trust company, Landsec, enters the top three in the FTSE 100 rankings for the first time, moving up three places from last year.
The company is one of only ten across the FTSE 100 that demonstrate a detailed Net Zero strategy. Their strategy incorporates the reduction in energy consumption, investment in renewables and the use of carbon removal in order to reach Net Zero by 2030. Achieving this impressive commitment will make them one of the first FTSE 100 companies to reach Net Zero, with the majority of other companies aiming for 2050. The company also sets ambitious SBTi approved, 1.5oC aligned carbon reduction targets to reduce their emissions by 70% across Scope 1,2 and part of its Scope 3 by 2030 against a 2013/14 base year. The recent publication of their Green Bond Framework outlines how Green Bonds will be applied by the company to fund appropriate projects that support their sustainable business strategy, including green building developments. Landsec also sources 97% of its electricity from renewables both through self-generation, using PV panels, as well as external purchasing.
COVID-19
As a consequence of COVID-19, much of the world’s industry went into lockdown the second quarter of this year and we witnessed a significant drop in CO2 emissions as a result. Although it is too early to measure the impacts to corporate emissions in this year’s report, it is estimated that overall emissions globally for 2020 will be down by 5-7%. However, EcoAct warns that with a shift to home working that needs to be accounted for, emissions reductions for businesses should not be assumed.
Next year the research will be looking at how companies have disclosed the impacts of COVID-19 on their emissions and expecting the climate leaders to be improving their strategies for Net Zero.
A copy of the report is available here: https://info.eco-act.com/en/sustainability-reporting-performance-ftse-100-2020
Notes for editors:
The research uses only publicly available information. The report defines sustainability as environmental sustainability rather than wider, social and governance issues. Companies are scored against 64 tailored criteria covering four subject areas: Measurement & Reporting; Strategy & Governance; Targets & Reduction; and Engagement & Innovation. The most recent disclosures are scored using annual integrated and corporate sustainability reports, and any additional links from company websites, including sustainability micro-sites and blogs.
About EcoAct
EcoAct is a privately held international sustainability consultancy and project developer, headquartered in Paris, with 160 employees in offices across France, the United Kingdom, Spain, the United States and Kenya. The company has unmatched depth and breadth in delivering holistic solutions to enable businesses to reduce their carbon emissions while driving commercial performance. EcoAct has undertaken carbon reduction and sustainability projects for some of the world’s leading brands while also developing and partnering with carbon offset, biodiversity and economic development programmes across Africa, Asia, China and South America. EcoAct is a CDP gold partner, a founding member of ICROA, a strategic partner in the implementation of the Gold Standard for the Global Goals and reports to the UN Global Compact.
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